When you overspend: 5 steps to recover from a spending spree

Did you overspend recently? Learn how you can rebound from your overspending by financially planning your next money moves.

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Have you ever spent more money than you planned? If you're a human who has had money at any point in your life, the answer is probably "yes."

No matter how disciplined you are, it's easy to get so distracted that your budget escapes your mind. Sometimes, overspending strikes without us even realizing it. Other times, you get so caught up in an event or a moment that you actively choose to forget your money goals.

Chances are good you've found yourself in one of the following situations at least once:

  • You had so much fun on vacation that you didn't even care how much you spent.
  • You got so caught up in a birthday celebration that you blew your budget.
  • You went overboard with holiday shopping because you wanted everyone to love their gifts.
  • You tried to overcome boredom or a bad week with "retail therapy."
  • You weren't paying attention and fell back into old spending habits.

While a temporary lack of focus can cause people to overspend, emotions may play a part, too. A recent poll revealed that almost half (49%) of Americans have spent more than they could afford for emotional reasons like stress, excitement, or sadness.* Who hasn't felt at least one of these emotions in the last year?

No matter the reason for a spending spree, it's important to get into damage control mode right away. If you react swiftly and decisively, you may nip your budgeting woes in the bud fairly fast, whereas a slow reaction (or no reaction) could easily make your money problems worse.

Overspending happens to everyone, but not everyone knows how to bounce back. These 5 steps can get you back on track toward your financial goals quickly:

Step 1: Assess the damage

Before you get back in the saddle, it's important to figure out how much damage you've done. Did you overspend for a few days? A few weeks? Several months? Did you overspend by a few hundred dollars—or a few thousand? Before you can move forward, it's important to answer these questions as openly and honestly as you can.

The best way to go about this is to pour through your bank and credit card statements for the last few months. Figure out which budget categories you've overspent in, how much you splurged, and how it might impact your other goals.

Did your temporary indiscretions leave you short on funds to pay other bills? If so, the best time to find that out is now. After all, you can't really create a plan to fix your problems until you define what—and how bad—they are.

Step 2: Get back on the budget bandwagon

The next step to overcoming overspending is getting back on track with your regular spending plan (if you had one). If you had a carefully planned budget in place already, it's crucial to get back on track right away. If you weren't using a budget, now may be the perfect time to get started.

There are several different budgeting strategies to consider, each of which comes with its own attributes. The most important step for you to take is to write down all your fixed expenses (rent or mortgage, insurance, car payments, utilities, etc.) and compare them to your income. From there, you can divvy up any additional income you have to negotiable budget categories like food and dining out, entertainment, and miscellaneous.

Ideally, you'll want to make sure you have plenty of cash built into your budget for savings and debt repayment. If you don't plan for savings and paying down debt in your budget, you're not making them a priority.

Step 3: Hatch a plan to pay your debt—or yourself—back

The overspending you need to overcome could fall into 2 different categories: spending money you have, or money you don't have. Either you spent money from your own savings or you charged your spending spree on a credit card.

No matter how it went down, your repayment strategy is the same. You need to pay off your credit card bills or pay yourself back. If you're using a budget, then you should have set some of your income aside for savings and/or debt repayment. This is where things get serious: if you want to build your savings back up or pay down your new debts, you have to follow through with your spending plan instead of spending your excess funds elsewhere.

Remember, it might take a while to right your spending wrongs. By hatching a repayment plan, you can spread the pain out over several months.

Let's say you spent an extra $500 out of your emergency fund on a whim. If you can't afford to replenish your savings in a single month, try spreading it out by saving $100 extra per month for 5 months.

If you charged an extra $1,000 on a credit card, try throwing an extra $100 on your bill every month until you're debt-free. If your credit card carries a high interest rate, you can also consider transferring your balance to a 0% APR credit card to secure zero interest for up to 21 months.

Step 4: Figure out what went wrong

Once you've assessed the damage and come up with a feasible plan to get back on solid financial footing, it's important to figure out what went wrong. Why did you overspend, and how can you prevent the same thing from happening again?

Whether you were excited, scared, bored, or depressed, the best way to keep your spending on track is always the same: budgeting. With a budget or spending plan in place, you have tangible spending goals to work toward every month. At the very least, you should actively track your spending so you know where your money is going and when.

If you don't use a budget or track your spending, you're bound to make the same mistakes over and over again. It's also quite possible that not having a budget is the reason you overspent in the first place.

Step 5: Look at the bright side

So, you spent more than you planned. It's probably not the first time it's happened, and it may not be the last, either. At least you're paying attention and you know where you've gone wrong.

A lot of people overspend for years without even realizing it. After all, the average household credit card debt for indebted households is over $16,000 this year. While much of that debt is likely due to emergency spending, some of it is the result of spending sprees that were never acknowledged or addressed.

By facing your problem head-on, you're taking the first step to making sure your spending doesn't spiral out of control.

The bottom line

Overspending happens to the best of us, but the ones who come out on top are those who don't bury their heads in the sand. You don't have to be perfect to get ahead financially, but you do you have to be honest.

Overspending is a problem, but its impact can be temporary if you see what's happening and take steps to change.

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*NerdWallet, NerdWallet Survey: Nearly Half of Americans Emotionally Overspend, Erin El Issa, January 31, 2017
Article copyright 2017 by The Simple Dollar. Reprinted from the September 12, 2017 issue with permission from The Simple Dollar.
The statements and opinions expressed in this article are those of the author. Fidelity Investments cannot guarantee the accuracy or completeness of any statements or data.
This reprint is supplied by Fidelity Brokerage Services LLC, Member NYSE, SIPC.
The third-party provider of the reprint permission and Fidelity Investments are independent entities and are not legally affiliated.

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